Insurance claim rejected? What to do in Pakistan

Key points

• The Insurance Ordinance 2000 writes a promise into every insurance contract: once payment is due and the claimant has met all the requirements, including complete papers, the company has 90 days to pay. After that it owes liquidated damages at five per cent above the prevailing base rate, at monthly rests, unless it proves the delay was beyond its control (section 118).
• This applies even if the policy says nothing about it: liquidated damages on late settlement are an implied term of every contract of insurance (2023 SCMR 826, para 5).
• In 2024 SCMR 426 the Supreme Court held that a death certificate, the union council's death register entry and a police report are official documents with a presumption of truth, and that an insurer which wants a post-mortem should arrange one itself (paras 9 and 10).
• A life policy that has run for two years cannot be refused because a statement in the proposal form was wrong, unless the company shows it was about a material matter, made fraudulently and knowingly (section 80; 2019 SCMR 1917, paras 4 and 5).
• Claims go to the Insurance Tribunal, not the ordinary civil court (section 122(3)); in the 2024 case a suit in a civil court was returned after almost four years. You can also complain to the Insurance Ombudsman after first writing to the company (section 129). The time limit to sue on a policy is three years from the death or the loss (Limitation Act 1908, Article 86; PLD 2020 SC 324, para 9).

Insurance claim rejected? What to do

Do not take the first no as final. The Insurance Ordinance 2000 writes a promise into every insurance contract: once the money is due and you have met all the requirements, including complete papers, the company has 90 days to pay. If it pays late, it owes liquidated damages, extra money for every month of delay, at five per cent above the prevailing base rate, unless it proves the delay was beyond its control (section 118).

If the company refuses, you can complain to the Insurance Ombudsman or bring a claim before the Insurance Tribunal, the special court for insurance claims (sections 122 and 129). In December 2023 the Supreme Court showed how far the law will follow a fair claim: it made a company pay a widow's life claim, with the extra for the delay, more than twenty years after her husband died (2024 SCMR 426).

2001 to 2023: the case

On 10 July 2001 a man bought a life insurance policy for Rs 500,000, at a yearly premium of Rs 39,740, and named his wife as the nominee. The premium was paid up to 2002. On 24 January 2003 he died in a road accident. A stranger reported it at Police Station Sherakot, Lahore, newspapers carried it, and his sons told the police they did not want a post-mortem. The family informed the company on 18 February 2003 (2024 SCMR 426, paras 2, 3 and 8).

The claim did not succeed. On 10 November 2003 she sued in a civil court in Lahore; the plaint was returned on 31 May 2007 because that court had no jurisdiction. She then went to the Insurance Tribunal, which dismissed her claim on 7 May 2015. On 15 October 2020 the Lahore High Court allowed her appeal and decreed the claim with liquidated damages under section 118. The company appealed to the Supreme Court, arguing that she had not proved the cause of death (paras 1 and 4 to 6).

What the Supreme Court said

On 13 December 2023 the Supreme Court dismissed the company's appeal. The company had never challenged the death certificate, the entry in the union council's death register or the police report, and these are official documents to which a presumption of truth is attached (para 9, citing PLD 1992 SC 822).

On the post-mortem the Court was practical: after an accident, families ordinarily avoid one, and "if the appellant/insurer deem it to be necessary, it should have been done by itself in order to protect its rights" (para 10). The widow had lodged her claim complying with all procedural requirements, and the company "has badly failed to make due payment as prescribed under the law" (para 11). The High Court's decree, with liquidated damages, stood.

The 90-day rule and the extra for paying late

Section 118 applies even if your policy says nothing about it. In a 2023 case, a school teacher covered by group insurance died in October 2008, his widow claimed within days, and the company refused in March 2009 under a revised contract that was signed only later, on 17 March 2009. It paid Rs 600,000 in August 2013 but resisted the extra. The Supreme Court upheld the liquidated damages: the refusal was not lawful, and the company had not shown that the delay was beyond its control (2023 SCMR 826, paras 2, 3, 5 and 7).

Two practical points follow. The 90 days run from the later of the date the money became due and the date you met all the requirements, so hand in complete papers and keep proof of the date. And the company cannot blame a reinsurer for its delay (section 118, Explanation).

The two-year rule for life policies

Companies sometimes refuse a life claim saying the policyholder hid an illness. The law limits this. An insurer cannot avoid a contract only for a non-disclosure or misstatement that was not fraudulent, or that would not have changed the premium or the terms (section 79(2)). And once a life policy has run for two years from the date it was effected, it cannot be called in question for a wrong statement in the proposal or related papers unless the company shows the statement was on a material matter, made fraudulently, and known to be false (section 80).

In a 2018 order the Supreme Court applied this to a policy bought in July 2005 whose holder died in September 2008. The company refused in 2010, alleging concealed ailments. But he had been examined before the policy by a medical specialist approved by the company, an old leg fracture from 1994 had no link to the cause of death, and the later investigation was not proved. The company was refused leave to appeal (2019 SCMR 1917, paras 2 to 5).

If your claim is rejected: step by step

1. Hand in complete papers, and keep a copy and proof of the date. 2. Ask for the refusal and its reasons in writing. 3. To use the Insurance Ombudsman, first write to the company that you intend to complain; if it does not reply, or replies unsatisfactorily, within a month, complain within the next three months (section 129). The Ombudsman can direct the company to reconsider, change its decision or pay reasonable compensation (section 130). If your insurer is a government company, such as State Life, complain to the Wafaqi Mohtasib (Federal Ombudsman) instead: the Insurance Ombudsman cannot take matters that fall within the Wafaqi Mohtasib's jurisdiction (section 127). In 2021 the Wafaqi Mohtasib ordered State Life to pay two widows' death claims, and the President upheld the orders.

4. To claim the money itself, file before the Insurance Tribunal: an ordinary civil court has no jurisdiction over matters the Tribunal decides (section 122(3)), which is how the widow in the 2024 case lost almost four years. Ask for liquidated damages under section 118 as well. 5. Do not wait: the time limit is three years from the death or the loss (Limitation Act 1908, First Schedule, Article 86; PLD 2020 SC 324, para 9). Keep every letter: an insurer that kept you waiting on its survey or investigation may be stopped from relying on limitation (PLD 2020 SC 324).

For law students and lawyers

Forum: Insurance Tribunals are constituted under section 121, and where no separate Tribunal is set up the Federal Government may confer its powers on a District or Additional District and Sessions Judge (proviso). Section 122(3) ousts every other court. An appeal lies to the High Court within 30 days if the claim or penalty is Rs 100,000 or more, heard by at least two judges (section 124). In the 2024 case the suit before the Civil Judge was returned as coram non judice after three and a half years (2024 SCMR 426, para 4).

Proof and good faith: official records (death certificate, union council register, police report) carry a presumption of truth, and the burden of any post-mortem the insurer thinks necessary is its own (2024 SCMR 426, paras 9 and 10). Section 118 binds even where the contract has no such clause, and a policy takes effect from the date it is signed (2023 SCMR 826, paras 5 and 7). Section 80 is a special law that makes a life policy incontestable after two years, counted from the date of the policy and not from knowledge (2019 SCMR 1917, paras 4 and 5, following P.C. Chacko (2008) 1 SCC 321 on the similar Indian section 45). Utmost good faith binds the insurer too, and ambiguities in a policy are read in favour of the insured (PLD 2020 SC 324, citing sections 75 to 77).

The case at a glance

Facts

A man bought a Rs 500,000 life insurance policy on 10 July 2001 and named his wife as nominee. He died in a road accident on 24 January 2003; the death was reported to the police in Lahore, and his sons chose not to have a post-mortem. The company did not pay. Her suit in a civil court was returned in 2007 for want of jurisdiction, the Insurance Tribunal dismissed her claim in 2015, and the Lahore High Court allowed her appeal in 2020 with liquidated damages.

The question

Could the insurer refuse because the widow had not proved the cause of death, and did it owe liquidated damages for paying late?

What the Court held

No, and yes. The death certificate, the union council's death register entry and the police report are official documents with a presumption of truth, which the insurer never challenged; if it wanted a post-mortem, it should have arranged one itself. The claim had been lodged with all requirements met, so the High Court's decree with liquidated damages under section 118 was upheld and the appeal dismissed (paras 9 to 11).

Why

Official records carry a presumption of truth (para 9, citing PLD 1992 SC 822). Families commonly avoid a post-mortem after an accident; getting one, if needed, was the insurer's job (para 10). Section 118 makes payment within 90 days of complete papers an implied term of every insurance contract (para 10; 2023 SCMR 826, para 5).

Limits

The ruling does not mean every claim must be paid: a policy obtained by a material, deliberate lie can still be avoided (sections 79 and 80), and an insurer escapes liquidated damages if it proves the delay was beyond its control (section 118(1)). It decides a claim whose papers were complete.

In the Court’s words

“official documents and presumption of truth is attached with them”

2024 SCMR 426, para 9

“on completion of all formalities, if the claim is not satisfied/ cleared within ninety days without any fault of the claimant when it becomes due, then, under the implied term of every contract of insurance the liquidated damages must be granted”

2023 SCMR 826, para 5

“The option to seek annulment of the policy is available to the insurer in case of a life insurance policy within a period of two years.”

2019 SCMR 1917, para 4

The law it relies on

What this does not mean

• It does not mean every claim must be paid. A policy obtained by a deliberate lie about something material can be refused, and the policy's own terms still apply.
• It does not mean the 90 days start when you first call the company. They run from the date the payment became due or the date you met all the requirements, including complete papers, whichever is later (section 118).
• It does not make the extra automatic if the company proves the delay was beyond its control (section 118(1)); a reinsurer's delay does not count.
• It does not decide your own claim. Each claim turns on the policy, the papers and the proof.

Questions people ask

Sources

• State Life Insurance Corporation of Pakistan's appeal (the respondent, a widow, is not named here), 2024 SCMR 426 (Supreme Court of Pakistan, 13 December 2023), paras 1-6, 8-11
  A widow's life insurance claim upheld with liquidated damages: official records proved the death, an insurer that wants a post-mortem must arrange it, and section 118 applies once the papers are complete. verified against full text
• State Life Insurance Corporation's appeal in a group insurance claim (the widow is not named here), 2023 SCMR 826 (Supreme Court of Pakistan, 6 March 2023), paras 2-7
  Liquidated damages under section 118 are an implied term of every insurance contract; a refusal under a contract not yet signed was unlawful. verified against full text
• State Life Insurance Corporation's petition in a life insurance claim (the widow is not named here), 2019 SCMR 1917 (Supreme Court of Pakistan, 19 March 2018), paras 2-5
  After two years a life policy cannot be avoided for misstatement unless the section 80 conditions are proved; an unproved claim of concealed illness failed. verified against full text
• Jubilee General Insurance Co. Ltd. v. Ravi Steel Company, PLD 2020 SC 324 (Supreme Court of Pakistan, 9 October 2019), paras 9
  Three years under Article 86 of the Limitation Act applies to insurance claims before the Tribunal; an insurer may be estopped from pleading limitation after stringing the insured along; utmost good faith binds both sides. verified against full text
• Insurance Ordinance, 2000, Sections 79, 80, 118, 121, 122, 124, 125, 127, 129 and 130 text checked in FAI Statute Search, 24 October 2026
• Limitation Act, 1908, First Schedule, Article 86 text checked in FAI Statute Search, 24 October 2026 Pakistan Code

Every quote and section above is traced to the full judgment or statute text by an automatic check that runs on every update.

What the reel says